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Guidelines for central government debt management in 2015
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Today the Government adopted guidelines for the management of the central government debt. The actual maturity of the central government debt is retained unchanged, but the direction of the foreign currency debt is changed so that the foreign currency exposure of central government will decrease gradually over the next few years.
The starting point for the Government’s guideline decision is that central government debt shall be managed in such a way as to make the costs and risks as low as possible.
“At present 15 per cent of the central government debt is in foreign currency. Gradually reducing this foreign currency exposure reduces the risks without an increase in the expected costs,” says Minister for Financial Markets and Consumer Affairs Per Bolund.
In recent years the Debt Office has analysed the costs and risks of foreign currency exposure in the central government debt. This analysis shows that foreign currency exposure does not result in lower costs in the long term, but does involve currency risk.
The annual rate of decrease of the foreign currency exposure is limited by a ceiling of SEK 30 billion, but is planned at SEK 20 billion. This corresponds approximately to the decrease of foreign currency exposure that arises when various financial instruments mature, i.e. without the Debt Office taking any active measures. The rate at which the foreign currency exposure decreases may be altered depending on what decision is taken concerning the question of hedging the foreign currency reserve of the Riksbank by entering forward contracts with the Debt Office. The rate of decrease is not expected to affect the krona exchange rate or the Debt Office’s possibilities of borrowing in foreign currency.
In order to increase transparency and simplify reporting, new measures are introduced for calculating the maturities and shares of the central government debt. One result of this is that changes are made to the benchmarks for maturity and the share of inflation-linked debt. In practice, however, the guidelines for maturity and the share of inflation-linked debt are unchanged.
The overall objective of debt policy is to minimise the cost of the central government debt in the long-term while taking risk in its management into account. The management of the debt shall be conducted within the framework of monetary policy requirements.
The Government primarily steers the expected costs for and risk in the central government debt by adopting guidelines for the composition and maturity of the debt. The Government adopts its guidelines following proposals from the Debt Office. The Debt Office is responsible for the operational management of the central government debt within the framework of these guidelines. Central government borrowing and debt management are evaluated every other year in a government communication to the Riksdag. The next evaluation will be submitted to the Riksdag in April 2016.
Guidelines for the composition of the central government debt
Foreign currency debt: Reduction of no more than SEK 30 billion per year
Inflation-linked debt: 20 per cent
Nominal krona debt is to make up the rest of the debt
Guidelines for maturities in the central government debt
Foreign currency debt: Duration 0.125 years
Inflation-linked debt: Duration 6-9 years
Nominal krona debt:
- Instruments with maturities of up to 12 years: Duration 2.3–2.8 years
- Instruments with maturities of more than 12 years: Long-term benchmark for outstanding volume of SEK 70 billion
Press Secretary to Minister for Financial Markets and Consumer Affairs Per Bolund
Phone (switchboard) +46 8 405 10 00